Written by Miles Fichtner
The Department of Government Efficiency (DOGE) is a new advisory committee to the executive branch. It is a task force, with an estimated expiration date less than halfway through Trump’s presidency, 18 months (CNBC, 15:29). This task force will be headed by Elon Musk and Vivek Ramaswamy. Musk was the largest contributor to the Trump Campaign, with over 237 million dollars being donated through his America PAC (Ingram, 2024). Ramaswamy ran against Trump in the 2024 presidential campaign, eventually backing out and endorsing Trump. Ramaswamy’s ideology and personal mission in regards to DOGE is the termination of the nanny state in all of its forms. (Lex Fridman Podcast, 2024, 0:55) Where nanny state in this case is referring to all overallocated and unnecessary bureaucracy in federal agencies. DOGE’s mission could therefore be summarized as a mass deregulation of federal agencies;
The effectiveness of DOGE can come down to expectations versus reality; The goals being massive cuts in spending in various federal departments including the Department of Education, Department of Health, and Human Services, the Pentagon, and others (Choo, 2024). By deconstructing the entirety of DOE and select programs within DHHS like planned parenthood, many federal workers will be faced with layoffs and job losses. However, Ramaswamy talks of more than just specific cuts in the quantity of federal employees; His view is that federal bureaucrats, not elected officials, could be cut by over seventy-five percent. Claiming in the Lex Fridman podcast “if your SSN ends in an even number you’re out, then of those left, if your SSN ends in an odd number you’re out.” (Ramaswamy, cited in Lex Fridman Podcast, 2024, 27:45). Claiming that a social experiment of this type would help the selection process of who’s fired remain unbiased. (Lex Fridman Podcast, 2024, 28:00). While this statement was not a policy recommendation, it highlights the massive waste Ramaswamy feels the government currently has. While It is hard to tell definitively how these cuts could reduce government spending, administrative costs from salary and benefits of federal employees, excluding military personnel, make up about 305 billion in spending, of the 6.75 trillion dollar national budget. Making a reduction of 75% in the size of government only accounts for a 3% reduction in the total spending (Choo, 2024).
Musk’s conflict of interest
One potential issue that arises from the two CEO’s new position in DOGE is that there could be conflicts of interest with policy recommendations in specific industries.
Musk, for example, owns numerous government-subsidized businesses; Musk holds military contracts with SpaceX, signing 2 contracts for nearly 160 million dollars in 2021 (Duffy, 2021). Tesla also receives tradable carbon credits from an emission based cap and trade subsidy program through the Environmental Protection Agency (EPA). “The automaker reported a revenue of $554 million from the Q3 2023 sale of carbon credits, significantly contributing to its profits … which representent 29% of net income” (Jennifer L, 2023). When Ramaswamy was questioned about Elon’s conflict of interest in the committee, Ramaswamy spoke of the personal financial burden he took on with the acquisition of Twitter (CNBC, 2024, 17:45), and the choice to speak his mind “not when it was easy but when it was hard” in the context of Trump’s endorsement. (Ramaswamy, as cited in CNBC, 21:30). Where he claims many other CEOs did not feel comfortable speaking up.
History of Deregulation.
Looking at previous administrations which have attempted similar policy changes. With Reagan’s Administration, we saw massive deregulation efforts and tax cuts as part of the supply-side, or trickle down economic plan, used as an attempt to spur investment in the private sector. The Grace Commision, housing top CEOs and executives tasked with cutting costs in federal agencies, ended up providing over 2000 recommendations in the final report in 1984. It would have cut some 424 billion over three years if policies were implemented. (Klein, 2024) However, there was a lot of criticism and pushback received in the Democrat-controlled house, and almost none of the policy recommendations were implemented.
Will it be different with DOGE?
Musk and Ramaswamy might have more luck getting legislation passed than Reagan considering the Republican-controlled Senate and House. The leverage and political control that Elon Musk has already exhibited during Trump’s campaign with Super PAC donations, as well as swaying congress on the most recent government shutdown with his posts on X, shows how an advisory committee co-led by the richest man on earth could have large effects on the executive and legislative branches of government. Ramaswamy claims that they have already gained traction in the Senate and House with the formation of a DOGE caucus and subcommittee; He also emphasizes the ability to deregulate with only executive power, where he states in the CFO interview with CNBC “If the executive branch can cause it to come into existence, the executive branch can cause it to come out of existence” (CNBC, 25:03), in reference to what he claims as multiple cases of waste, fraud, abuse, and programmatic errors in past adminstration’s spending. (Ramaswamy, as cited in CNBC, 2024, 8:37). Despite this, DOGE hoping to cut government spending by such a feat as two trillion dollars within 18 months is too large to come from voter hot issues like the DOE and Planned Parenthood, instead DOGE would have to dig into essential programs such as Medicare and Medicaid, which are much less likely to gain legislative traction (Lwayemi, 2024).
What could this mean for the economy broadly?
In the case that Musk and Ramaswamy’s plan for deregulation does gain traction, coupled with Trump extending tax cuts in 2025, we could see large investment opportunities for corporations and a reallocation of federal agencies budgets to private sector contracting that could benefit many sectors and industries. Trump has also spoken of heavy tariffs which could provide a short-term shock to the supply-chain resulting in higher prices for imports, increasing inflation in the short-term. However, Trump predicts that domestic investment will be spurred on U.S. soil, benefiting sectors such as energy and auto’s. (Welker, 8:34). Given that this level of investment is very long-term, and considering the infrastructure and capital to manufacture on U.S. soil, we could see foreign producers move to other markets. Similar to the Reagan Administration as well, we could see an increase in income-inequality with corporate tax cuts resulting in more stock buybacks. While a culture of deregulation and efficiency in the private sector would be further reinforced by the new cuts in the public sector.
Overall, Ramaswamy and Musk may be optimistic on getting legislation passed come the new year, but looking at previous administrations, the likelihood of succeeding cutting the amount they hope for, is low. While their goals may stimulate the economy, the social cost of the potential income inequality could leave the everyday American worse off. We will have to wait and see, come the next term.
References
Klein, C. A&E Television Networks. (n.d.). How Ronald Reagan tried to shrink government spending. History.com. https://www.history.com/news/ronald-reagan-grace-commission-government-efficiency
Choo, L. (2024, November 28). Elon Musk’s doge may cut these federal agencies-as CFPB becomes latest target. Forbes. https://www.forbes.com/sites/lindseychoo/2024/11/27/elon-musk-doge-takes-aim-federal-agencies-where-cuts-can-be-made/
CNBC. (n.d.). DOGE Co-Lead Vivek Ramaswamy at CNBC’s CFO Council Summit . YouTube. https://www.youtube.com/live/HWVqH0v6Dnc?si=ySQRdgBcNXWmsDdx
Duffy, K. (n.d.). Elon Musk’s spacex wins 2 Pentagon contracts for nearly $160 million to launch missions with its Falcon 9 Rockets. Business Insider. https://www.businessinsider.com/elon-musk-spacex-won-two-pentagon-contracts-launch-military-rockets-2021-3
Ingram, J. (n.d.). Elon Musk spends $277 million to back Trump and Republican candidates. CBS News. https://www.cbsnews.com/news/elon-musk-277-million-trump-republican-candidates-donations/
L, J. (2023, October 19). Tesla’s Record Carbon Credit Sales Up 94%Year-Over-Year. Carbon
https://carboncredits.com/teslas-record-carbon-credit-sales-up-94-year-over-year
Lwayemi, T. (2024, November 18). The department of government efficiency is inefficient. The American Prospect. https://prospect.org/power/2024-11-18-department-government-efficiency-inefficient/